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Absolut Appeal: A-B Eyes Move Into Spirits

With Dollars Draining Out of Suds, Brewer May Grab $4.3 Billion Vodka Brand

ORLANDO, Fla. (AdAge.com) -- Anheuser-Busch looks to be eyeing a deal with a major spirits player, and it might just have a taste for Absolut vodka.

That was the persistent buzz at last week's National Beer Wholesalers Association annual meeting, where the brewer's executives-including A-B heir apparent August Busch IV-laid out some wince-inducing statistics showing that the $82 billion beer category continues to lose drinkers to wine and spirits.

While Mr. Busch didn't lay out specific steps A-B intended to take, distributors in attendance said there was little question he was telling them-without specifically telling them-that A-B is on the verge of a major spirits purchase or venture.

"It sure sounded like it to me," said one convinced northern-state A-B distributor who asked not to be identified. "They want the growth and margins that spirits offer, and they've made it very clear they've done more than just think about it."

In a Sept. 19 report, investment bank UBS named A-B as a potential buyer for Absolut, along with major spirits marketers such as Fortune Brands, Brown-Forman and Pernod Ricard. "We believe one midterm strategic option for [A-B] is to expand further into spirits, therefore we believe they could consider looking at [Absolut] as one route into this," said the report, which valued Absolut at $4.3 billion.

A-B declined to comment on its plans. Absolut, the world's fifth-largest spirits brand, is owned by the Swedish government and couldn't be reached. But it is thought to be on the block because recent elections in the country have empowered parties looking to sell state assets.

Beer Business Daily Editor Harry Schumacher, who was the first to report that A-B seemed to be prepping its distributors for a surge into spirits, was bombarded by questions regarding A-B's intentions during a NBWA workshop he led on the future of beer wholesaling. "You only talk about something this much to prepare people for when you do it," Mr. Schumacher said. He, too, cited Absolut as A-B's likeliest acquisition target.

The King of Beers has gone so far as to fund an ad campaign intended to boost the category as a whole, themed "Here's to beer." But with beer's share of the alcohol market continuing to fall-to 51.6% last year from 55.5% in 2000-and spirits' share continuing to rise-from 31.8% from 28.7% during the same period-it looks increasingly like A-B is adopting an if-you-can't-beat-'em-join-'em approach.

Past scuttlebutt has linked A-B, which has urged its distributors to obtain liquor licenses, to a possible joint venture with Bacardi. And it has also begun tinkering with its own spirits brands, including one launched last year called Jekyll & Hyde that's due for a larger rollout this winter.